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F I S C A L I M P A C T R E P O R T

SPONSOR Park

ORIGINAL DATE

LAST UPDATED

2/6/07

HB 503

SHORT TITLE Classroom Teacher Income Tax Credit

SB

ANALYST Francis

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

FY09

($3,300.0)

($13,200.0)

($11,000.0) Recurring General Fund

(Parenthesis ( ) Indicate Revenue Decreases)

Relates to HB117

SOURCES OF INFORMATION

LFC Files

Responses Received From

Taxation and Revenue Department (TRD)

SUMMARY

Synopsis of Bill

House bill 503 amends the Income Tax Act to allow a credit to classroom teachers in either

private or public schools of $500.00 provided the teacher earns has taxable income of no more

than $100,000.

The effective date is January 1, 2007.

FISCAL IMPLICATIONS

There are approximately 23,000 teachers in both public and private primary and secondary

schools and about 95 percent of them are expected to qualify for the full amount of the credit.

As the average teacher’s salary is approximately $39,000 and the entry level is approximately

$30,000 which means that virtually all of the ones will qualify for the full credit. For 2007, the

credit is expected to reduce personal income tax revenues which flow to the general fund by $11

million (22,000 * $500). Due to the timing of the legislation, it’s assumed that 30 percent of the

House Bill 503 – Page

2

2007 impact will be in FY07 and the remainder in FY08. The impact for 2008 is divided evenly

between FY08 and FY09.

Table 1: Teacher Salaries in NM

SOC

Code

Occupational Title

Industry

Title

Entry

Level

Mean

(average)

Median

Experienced

252012

Kindergarten Teachers,

Except Special

Education

Total, All

Industries

$29,826.00

$38,185.00

$37,291.00

$42,364.00

252022

Middle School

Teachers, Except

Special and Vocatio

Total, All

Industries

$29,977.00

$38,578.00

$37,450.00

$42,879.00

252031

Secondary School

Teachers, Except

Special and Voca

Total, All

Industries

$30,349.00

$41,411.00

$39,790.00

$46,942.00

Source: NM Department of Labor

SIGNIFICANT ISSUES

The definition of teacher in HB503 includes teachers who work at “during at least nine months"

in the taxable year for a New Mexico school district or NM-accredited private school and teach

kindergarten through twelfth grade. This provision could be construed due to the language as

any teacher who works during some nine month period. While the intent is clear to require at

least nine months employment, the language is ambiguous.

Since virtually all teachers are likely to qualify, Taxation and Revenue Department (TRD) points

out that it is equivalent to giving a $500 pay raise to all public teachers outside of the normal

appropriation process.

The Public Education Department (PED) raises some important issues:

The definition of “classroom teacher" in the bill would exclude duly licensed teachers

teaching in the state’s institutions and the state’s educational institutions (e.g., School for the

Visually Impaired, School for the Deaf and Hard of Hearing, New Mexico Military Institute

and the various juvenile justice and other juvenile treatment facilities operated or licensed by

the Children, Youth and Families Department (CYFD)).

The definition of “classroom teacher," which understandably is directed only toward those

teachers actually teaching in a classroom, found n Section 22-1-2(Z) of the Public School

Code is quite different, which is likely to result in teacher-union disapproval ("teacher means

a person who holds a level one, two or three-A license and whose primary duty is classroom

instruction or the supervision, below the school principal level, of an instructional program or

whose duties include curriculum development, peer intervention, peer coaching or mentoring

or serving as a resource teacher for other teachers").

TRD reports that the language does not spell out that PED must accredit the private school and

could be interpreted as any NM entity providing accreditation. TRD also indicates that the

proposed statute might be perceived as unfairly penalizing teachers who, with their spouse’s

income, have over $100,000 in taxable income.

House Bill 503 – Page

3

TECHNICAL ISSUES

TRD:

Language on page 2, lines 7 thru 12 stating that “an individual who was employed during at

least nine months of the taxable year" qualifies for the credit is unclear. One could interpret

it to mean that the individual could be employed during any part of a nine month period in

the year since no minimum period of employment is specified.

NF/nt